11 things about McDonald's that may surprise you

By Aimee Picchi

Updated on: July 17, 2015 / 3:17 PM
/ MoneyWatch

McDonald's (MCD) is the American corporation that some people love to hate.

The company gained prominence by expanding across the country faster than mushrooms sprout in a rainstorm. Americans are never farther than 115 miles from a McDonald's, while many cities have several of the chain's outlets within driving distance.

Ubiquity doesn't guarantee success, however. McDonald's is coping with slumping sales thanks to growing consumer preference for fresher and healthier food, as well as frustration with what customers complain is poor service. Amid the turmoil, McDonald's earlier this year appointed a new chief executive, Steve Easterbrook, who has vowed to right the ship by improving the quality of food and service.

Key to that plan will be reviving interest among so-called millennials, which is now the largest U.S. generational group, even surpassing the baby boomers. While boomers may still enjoy a visit to the Golden Arches, 18-to-34-year-olds are increasingly opting for "fast-casual" restaurants such as Chipotle (CMG) and Panera Bread (PNRA).

While it's unclear whether Easterbrook can live up to his vow to make McDonald's a "progressive" hamburger chain, there's no denying that the largest fast-food chain is still a force to be reckoned with. The company's 36,000 locations serve about 69 million customers in 119 countries each day.

The stock is outperforming the market

Although McDonald's has yet to demonstrate results, investors seem to like Easterbrook's turnaround plan. Through July 15, the company's stock price has gained 5.1 percent, outperforming both the S&P 500 and the Dow Jones industrial average, which have risen 1.5 percent and 0.5 percent, respectively.

That comes as investors have even less visibility about the fast-food giant's performance than before, given the company recently stopped reporting monthly sales figures.

Some investors like McDonald's for its dividend distribution, which pays a yield of 3.5 percent and has increased every year since it started paying dividends in 1976, according to The Motley Fool.

Its head chef graduated from the Culinary Institute of America

Most consumers might not give McDonald's high marks for the quality of its food, but the company puts a lot of time into developing new products. The person behind those efforts is head chef Dan Coudreaut, dubbed "Chef Dan."

Coudreaut graduated from the prestigious Culinary Institute of America and worked in Dallas' Café Pacific and The Four Seasons before joining the fast-food chain in 2004. He isn't the first head chef for McDonald's, either. Ray Kroc, who bought the business from the McDonald's brothers and made it into a global phenomenon, hired Rene Arend as executive chef in the late 1970s. Arend is credited with creating Chicken McNuggets and the McRib Sandwich.

As for Chef Dan, he's credited with helping develop the McCafe line of drinks and the Southwest Chicken Salad.

The U.S. isn’t McDonald's biggest market

McDonald's is an American icon, but the U.S. isn't its biggest market. That claim falls to Europe, which provides McDonald's with its largest chunk of revenue, at 40 percent of 2014 sales. The U.S. provided 32 percent of total sales.

European sales are suffering as well, however. Same-store sales declined 0.6 percent last year, hurt by lower revenue from Germany and Russia, according to the company's annual report.

To revive sales in Europe, McDonald's upgraded all of its restaurant interiors in the region, as well as a majority of exterior storefronts. It also added new menu items and new McCafe outlets.

It’s closing more stores than opening new ones

A company spokeswoman told the wire service that the closings would be "minimal," as well as pave the way for further growth. Still, given McDonald's historic mandate to expand across the U.S., the shrinking footprint may have Ray Kroc rolling in his grave.

The restaurant closings will be a mix of company-owned locations and franchises.

It’s one of the biggest real estate companies in the world

McDonald's isn't only the biggest fast-food chain in the world, it's also one of the biggest real estate companies. The value of its real estate assets amounts to more than $28 billion, which has prompted some investors to speculate that McDonald's could spin off its real estate holdings into a real estate investment trust, or REIT, according to Nation's Restaurant News.

Still, that's not likely to happen for a number of reasons, the trade publication said. McDonald's collects rent from its franchisees, and is able to control its operations through that system. Separating the real estate business from the restaurant operations would likely weaken its relationship with franchisees, NRN noted.

1 in 8 U.S. workers has been employed by McDonald’s

McDonald's is also one of the country's biggest employers, with 420,000 workers at the end of 2014. Over its history, the fast-food chain has employed 1 in 8 Americans, according to an estimate in the book "Fast Food Nation."

Those include celebrities and successful business people, ranging from Amazon.com (AMZN) founder Jeff Bezos to pop singer Pink. Bezos told Fast Company that "one of the great gifts I got from that job is that I can crack eggs with one hand. My favorite shift was Saturday morning. The first thing I would do is get a big bowl and crack 300 eggs into it."

It offers free WiFi

Trying to stay relevant in a digital age, McDonald's has added something that Americans say is more important than the telephone or TV: Internet access.

It delivers

Most Americans know McDonald's as a drive-through service or in-restaurant experience, but the chain has a sizable delivery service in Asia, where it's a $1 billion business, CEO Easterbrook said earlier this year at an analyst meeting.

That idea may arrive in the U.S. soon, with the restaurant chain testing delivery service in New York City. So far, the test is going well, with McDonald's seeing repeat customers and higher-than-average checks from people who order for delivery, Easterbrook said.

It’s decentralized

While many Americans view it as a single behemoth, the company operates with a decentralized organizational system. According to the 2008 book "Understanding Business Strategy," the company operates with a "freedom within a framework" mantra. That's allowed regional variations, such as vegetarian-friendly dishes in India and the McArabia sandwich in Pakistan.

The company's commercials and marketing strategy allows the company to tailor ads geared to regional audiences. Last year, McDonald's was named Marketer of the Year at the Cannes Lion international ad festival, helped by its regional marketing efforts.

Buying a franchise will cost you

If you want to become a franchisee, you'll need a lot of cash. The average McDonald's restaurant generates about $2.5 million in annual sales, which makes it one of the country's highest-grossing chains by location, according to QSR. (Only Chick-fil-A and Krispy Kreme have higher per-restaurant sales.)

To buy a franchise, McDonald's requires owners have liquid assets of at least $750,000, while startup costs can set you back by as much as $2.3 million, according to Business Insider. There's also a $45,000 franchise fee and a monthly service fee that takes 4 percent of gross sales. On top of that, franchisees pay monthly rent to the company.

In good times, this works well. But when times are tough, as they are now, franchisees start to grumble. Relations between McDonald's and its franchisees have hit a new low this year, according to Reuters.

Coffee is hot stuff

Beverages have a higher profit margin than food, and McDonald's is viewing its McCafe effort as a way to compete with Starbucks and Dunkin Donuts.

In Europe, which is McDonald's biggest market, McCafes operate as standalone cafes or counters within restaurants in countries such as Germany and France. In the U.S., consumers have been drawn to the concept partly because it offers fancy drinks like lattes at a fraction of the price of Starbucks. By 2011, McDonald's was selling more than $2.1 billion in coffee each year.